Malaysian stocks are down 2% after the government announced a 'windfall' tax on corporations

[ASEAN NOW Content Team]

 

Malaysian stocks slumped on Monday as the government imposed a one-time "windfall" tax on businesses in order to boost income for the coming fiscal year.

The benchmark FTSE Bursa Malaysia KLCI index plummeted roughly 2.2 percent, making it one of Asia-worst-performing Pacific's stock markets.

Malaysian Finance Minister Tengku Zafrul Aziz announced the government's budget for 2022 on Friday, which contains the country's largest-ever expenditure plan of over 332 billion ringgit ($80 billion) to help the economy recover from the Covid-19 pandemic.

Zafrul outlined a number of measures aimed at increasing government revenue, including raising the tax rate on company income over 100 million ringgit from 24 percent to 33 percent by 2022.

 

Investors, according to analysts, will be focused on tax increases.

"Due to the government's significant expenditure demand in light of the pandemic crisis, the windfall tax is expected to be a one-time initiative."
"It would still be a big bite for some companies," Wellian Wiranto, an analyst at Singapore's OCBC bank, said.

Overall, according to Wiranto, the rise in government spending will improve Malaysia's economic recovery beyond 2022.

According to the International Monetary Fund, the Southeast Asian economy would rise by 3.5 percent this year and 6% next year.
In 2020, Malaysia's economy shrank by 5.6 percent.

 

This year, the country had to reimpose lockdown restrictions in order to combat a high increase of Covid cases, which slowed economic activity.
The government lifted most social-discrimination measures once the number of daily reported cases decreased and the vaccination rate climbed.

According to Denise Cheok, an economist from Moody's Analytics, Malaysia appears to be on schedule to reopen entirely by early 2022.

"The Malaysian economy's brighter prognosis is bolstered by the expansionary budget for next year."
The resumption of domestic and international travel, as well as rising commodity prices, will enhance the economy's recovery from the pandemic's effects, according to Cheok.